Gold rises to seven-week high after data disappoint

Silver rides on gold's coattails to rise to eight-week high

SAN FRANCISCO (MarketWatch) -- Fears of economic gloom and doom helped gold rise to a seven-week high and silver post its best finish in eight weeks.

Gold for December delivery added $7.90, or 0.6%, to $1,241.30 an ounce on the Comex division of the New York Mercantile Exchange.

Silver for September delivery added 65 cents, or 3.5%, to $19.03 an ounce.

Most metals tracked gold higher, with the exception of copper. The gains stemmed from government reports on Wednesday showing a weaker-than-expected rise in orders for durable goods and a record-low pace for sales of new homes.

For silver, Wednesday's settlement was also the biggest one-day increase since June.

"It's trite to say it, but silver really is performing as the poor man's gold right now," said Charles Nedoss, a senior market strategist with Olympus Futures in Chicago.

As gold broke through the $1,240-an-ounce mark, some investors started to migrate to much cheaper silver, he said. Nearly 40,000 silver contracts changed hands on Wednesday, whereas an average of about 25,000 is the norm, Nedoss added.

Investors are also starting to roll into the December silver contract. That contract added 64 cents, or 3.5%, to $19.07 a pound.

The Commerce Department on Wednesday reported that durable-goods orders rose 0.3% in July, largely thanks to demand for transportation equipment. Economists surveyed by MarketWatch were expecting a 2.7% increase. Read more about durable-goods orders.

Later in the day, the department said sales of new homes fell to a record low in July, as demand has dried up after tax breaks expired in April. Read more about new-home sales.

Copper for September delivery declined on the news. The red metal was off 3 cents, or 1%, to settle at $3.21 a pound. That's copper lowest price in nearly one month. The metal settled at $3.21 a pound on July 27.

Copper, which is widely used in construction wiring, had been under pressure ever since a Tuesday report showed a 27.2% plunge in existing-home sales, which foretell the plunge for new homes.

Traders noted that gold and silver gains came on a day the dollar was stronger, indicating the upward momentum is strong and likely to hold at least in the near future.

"That's very bullish for gold," said Matt Zeman, a strategist with LaSalle Futures in Chicago. "The housing numbers were disastrous, and one has to wonder how much more ammunition (the Federal Reserve) has," he said.

The dollar index
DXY, -0.46%,
which compares the U.S. unit to a basket of six other currencies, added 0.1% to 83.25.

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